BioScrip (BIOS) Downgraded to 'CCC+' by S&P; Says Results Continue to Disappoint

Standard & Poor's Ratings Services lowered its corporate credit rating on home infusion services provider BioScrip (Nasdaq: BIOS) to 'CCC+' from 'B-'. The rating outlook is negative.

We also lowered the issue-level rating on BioScrip's senior secured term loan to 'B-' from 'B'. Our recovery rating on this debt remains '2', indicating our expectation for meaningful (50% to 70%; at the lower end of the range) recovery of principal in the event of a payment default.

In addition, we lowered the issue-level rating on the company's senior unsecured notes to 'CCC-' from 'CCC'. The recovery rating on this debt remains '6', indicating our expectations of negligible (0% to 10%) recovery in the event of default.

"The company's operating performance in the second quarter fell meaningfully short of our expectations for sequential improvement," said Standard & Poor's credit analyst David Kaplan. This follows weaker-than-expected results in the first quarter in the wake of significant billing and collection issues in 2014 stemming from the integration of an acquisition. This pattern is prompting us to again reassess our forecast for 2015 and 2016. The company also announced initiatives to reduce costs, the sale of its PBM business, and that it plans to explore more divestitures and other strategic options, including the possible sale of the company.

Given debt levels we believe the company will likely default if it is unable to improve profitability; moreover, given the company's pattern of falling short of its guidance our confidence in the company's ability to execute on its ambitious turnaround plan is limited.

Our negative outlook reflects the downside risk to our revised base case given our decreased confidence in the company's ability to execute on its plan to quickly improve profitability in 2016.

We would likely lower the rating if we expect adjusted EBITDA (including recurring "one-time" items) in 2015 or 2016 to fall short of about $35 million, or if liquidity becomes constrained. In this scenario, we could conclude that BioScrip's capital structure is unsustainable over the near term.

We would consider revising the outlook to stable or an upgrade, if we develop greater confidence the company can meet our base-case expectation, including ultimately growing EBITDA to about $50 million.

You May Also Be Interested In

• Paramount Global (PARA) and Skydance are closer to a merger - CNBC
• IBM tumbles on soft Q1 revenue; announces HashiCorp $6.4bn acquisition
• MarineMax (HZO) PT Lowered to $35 at Stifel